JP Morgan Chase 2009 Annual Report Download - page 217

JPMorgan Chase & Co./2009 Annual Report 215
The Firm also provides the multi-seller conduit vehicles with pro-
gram-wide liquidity facilities in the form of uncommitted short-term
revolving facilities that can be accessed by the conduits to handle
funding increments too small to be funded by commercial paper
and in the form of uncommitted liquidity facilities that can be
accessed by the conduits only in the event of short-term disruptions
in the commercial paper market.
Because the majority of the deal-specific liquidity facilities will only
fund nondefaulted assets, program-wide credit enhancement is
required to absorb losses on defaulted receivables in excess of
losses absorbed by any deal-specific credit enhancement. Program-
wide credit enhancement may be provided by JPMorgan Chase in
the form of standby letters of credit or by third-party surety bond
providers. The amount of program-wide credit enhancement re-
quired varies by conduit and ranges between 5% and 10% of the
applicable commercial paper that is outstanding.
The following table summarizes Firm-administered multi-seller conduits. On May 31, 2009, the Firm consolidated one of these multi-seller
conduits due to the redemption of the expected loss note (“ELN”). There were no consolidated Firm-administered multi-seller conduits as of
December 31, 2008.
2009
2008
December 31, (in billions) Consolidated Nonconsolidated Nonconsolidated .
Total assets funded by conduits $ 5.1 $ 17.8 $ 42.9
Total commercial paper issued by conduits 5.1 17.8 43.1
Liquidity and credit enhancements
Deal-specific liquidity facilities (primarily asset purchase agreements) 8.0 24.2(b)
55.4
(b)
Program-wide liquidity facilities 4.0 13.0
17.0
Program-wide credit enhancements 0.4 2.0
3.0
Maximum exposure to loss(a) 8.0 24.8
56.9
(a) Maximum exposure to loss, calculated separately for each multi-seller conduit, includes the Firm’s exposure to both deal-specific liquidity facilities and program-wide
credit enhancements. For purposes of calculating maximum exposure to loss, the Firm-provided, program-wide credit enhancement is limited to deal-specific liquidity
facilities provided by third parties.
(b) The accounting for the guarantees reflected in these agreements is further discussed in Note 31 on pages 238–242 of this Annual Report.
Assets funded by the multi-seller conduits
JPMorgan Chase’s administered multi-seller conduits fund a variety of asset types for the Firm’s clients. Asset types primarily include credit card
receivables, auto loans, trade receivables, student loans, commercial loans, residential mortgages, capital commitments (e.g., loans to private
equity, mezzanine and real estate funds, secured by capital commitments of highly rated institutional investors), and various other asset types.
It is the Firm’s intention that the assets funded by its administered multi-seller conduits be sourced only from the Firm’s clients and not origi-
nated by, or transferred from, JPMorgan Chase.
The following table presents information on the commitments and assets held by JPMorgan Chase’s administered nonconsolidated multi-seller
conduits as of December 31, 2009 and 2008.
2009 2008
Unfunded Commercial Liquidity Liquidity Unfunded Commercial Liquidity Liquidity
December 31, commitments to paper funded provided by provided commitments to paper funded provided by provided
(in billions) the Firm’s clients
assets third parties by the Firm the Firm’s clients assets third parties by the Firm
Asset types:
Credit card $ 1.1 $ 5.2 $ — $ 6.3 $ 3.0 $ 8.9 $ 0.1 $ 11.8
Vehicle loans and leases 1.8 5.0 — 6.8 1.4 10.0 — 11.4
Trade receivables 2.8 1.8 — 4.6 3.8 5.5 — 9.3
Student loans 0.3 1.3 — 1.6 0.7 4.6 — 5.3
Commercial 0.2 1.2 — 1.4 1.5 4.0 0.4 5.1
Residential mortgage — 0.6 — 0.6 — 0.7 — 0.7
Capital commitments 0.2 1.7 0.6 1.3 1.3 3.9 0.6 4.6
Rental car finance 0.4 — — 0.4 0.2 0.4 — 0.6
Equipment loans and
leases 0.2 0.4 — 0.6 0.7 1.6 — 2.3
Floorplan – vehicle — — — — 0.7 1.8 — 2.5
Consumer — 0.2 — 0.2 0.1 0.7 0.1 0.7
Other — 0.4 — 0.4 0.6 0.8 0.3 1.1
Total $ 7.0 $ 17.8 $ 0.6 $ 24.2 $ 14.0 $ 42.9 $ 1.5 $ 55.4